Here's our summary of key economic events overnight that affect New Zealand with news markets are in a holding pattern today ahead of tomorrow's US non-farm payrolls report.
US jobless claims data came in pretty much as expected at 324,000 but this was lower than the prior week. And the total number of people on job support benefits fell to under 2.9 mln which was a substantial drop. Tomorrow we get the non-farm payrolls report and the expected July job gains are +870,000. A lot hangs on this level with recent evidence suggesting this may be an overly high expectation.
American vehicle sales in July ran at the annual rate of 14.8 mln rate which was a drop from a 15.2 mln rate in June. This is now a much smaller car market than what we see in China where the annual sales rate runs at over 20 mln.
Meanwhile, the Biden Administration and US carmakers seem set to announce that half of all cars and light trucks sold there by 2030 would be electric vehicles under voluntary targets. This caps a very fast shift to EVs across the world.
And in another regulatory change, the US SEC is getting ready to regulate crypto assets in the same way as stocks, bonds and commodity-related trading instruments.
Both the US and Canada released June goods and services trade data overnight. The Americans saw exports and imports grow, but imports slightly more so their deficit widened slightly. The Canadians reported a good export rise but a fall in imports, so they ended up reporting a surprise merchandise trade surplus.
And the latest July data is showing that the housing markets in both Toronto and Vancouver are taming down, and quite quickly.
In China, very high electricity demand is 'forcing' them to toss aside their recent environmental commitments. Fifteen shuttered coal mines are the latest to be re-opened, on top of 38 in Inner Mongolia last week. In Beijing, it seems environmental goals are for international media consumption and entirely fudgeable, whereas keeping the economy going is their main concern. The opening of their carbon market hasn't won plaudits either.
Meanwhile, the iron ore price keeps on falling, down another -6% yesterday taking the total drop in just three weeks to -23%.
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There were a few central bank policy decisions released over the past 24 hours. In Brasilia, Brazil, they raised their policy rates by +1.0% to 5.25% in the face of sharply rising inflation. In London, England they did nothing. In Prague, Czechia (the Czech Republic), they raised their policy rate +25 bps to 0.75%
In Australia, their June trade surplus for both goods and services of AU$10.5 bln is a fresh record high for any month, eclipsing the previous peak of AU$9.9 bln in January. But almost all of this strength is due to higher prices - it is possible that the final data will show Aussie merchandise export volumes falling. And if prices start retracing, the combination could generate a rapid unwinding of their recent goldilocks run.
There were 262 new community cases in NSW yesterday with another 133 not assigned to known clusters, so still going backwards there. Victoria is reporting more new cases and are going back into a snap lockdown. There were street protests. Queensland is reporting 27 new cases so starting to grow there. However, Queensland authorities talking about re-opening. Overall in Australia, 20% of Aussies are fully vaccinated, 42% have now had at least one shot. Aussie corporates are now starting to insist on 'no jab, no job' policies.
On Wall Street, the S&P500 is firmer today by +0.4% and gaining back yesterday's dip. Overnight, European markets were all up another +0.4% on average except for London which was down -0.1%. Yesterday the very large Tokyo market rose +0.5%, But Hong Kong fell -0.8% and Shanghai fell -0.3%. The ASX200 rose a minor +0.1% but it was to a new record high, while the NZX50 Capital Index fell by -0.3%.
The UST 10yr yield starts today at 1.22% and up +4 bps overnight. The US 2-10 rate curve is to now at just on +101 bps and little-changed. But their 1-5 curve is steeper at +65 bps, and their 3m-10 year curve is also steeper at +117 bps. The Australian Govt ten year benchmark rate starts today at 1.17% and up +3 bps. The China Govt ten year bond is at 2.84% and down -2 bps. The New Zealand Govt ten year is now at 1.60% and also down -2 bps after yesterday's sharp rise.
The price of gold is now just on US$1805/oz and down -US$9 from where we were yesterday.
Oil prices have been active overnight but are now little-changed from this time yesterday so in the US they are under US$69/bbl, while the international Brent price is just on US$71/bbl.
The Kiwi dollar opens today just on 70.6 USc and up again since this time yesterday even if only slightly. Against the Australian dollar we are soft at 95.3 AUc. Against the euro we are unchanged at 59.6 euro cents. That means our TWI-5 starts today at 73.4 and unchanged.
The bitcoin price is now at US$40,293 and up +1.6% from this time yesterday. Volatility in the past 24 hours has been very high at +/- 4.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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69 Comments
Perhaps our friends in the pacific will not be getting their vaccines elsewhere any time soon.
We should be compelled to share ½ our vaccine supplies with our friends in the pacific.
Germany & France ignores W.H.O. call to administer boosters (3ʳᵈ vaccination dose) in their country despite worldwide vaccine shortage.
Ignoring WHO call, Germany, France to give COVID-19 vaccine boosters
United States converted vaccine producing facilities to produce vaccines for their animals instead of making more supplies for humans.
Hi David, Below articles confirms what many have been commenting that in future only business in NZ will be housing business as everyone realizes that it is not worth putting money and taking the risk besides putting in hours - work hard when under assurance from Orr and Jacinda, flipping houses can give multiple returns and both Orr and Jacinda not only by their words but action or inaction have gave clear indication of their intent.
https://i.stuff.co.nz/business/opinion-analysis/125950625/reining-in-th…
Both of them may try to portray that are concerned but reality is will never take TIMELY AND WHOLE HEARTED MEASURES to control the runaway house price.
Yes he finally quit banging the "Your better off to Rent" drum years ago now when he actually sat down and did the math and lifestyle benefit analysis, which you can do in your head or on the back on an envelope. Arguably if housing is truly a Ponzi then there is a greater risk at getting in now at this late stage, however as Covid proved only months ago, nobody really knows the future.
Yes I think he suffered from that academic view that the changes required would be self evident and a market correction would be along shortly. So many external variables he could not account for, nor could anyone to your point above. Aggressive trading on momentum data would seem to be the only safe ground, anyone who thought we could account for fundamentals must surely see the counter-argument data stacked up now.
China restarts the coal mines! China saves its economy! With all due respect to the undeniably correct policies being applied in little ol’ NZ and being so self righteously proclaimed from way down there in the south east of nowhere, the sad truth is NZ is, to coin a phrase my father learnt from WW2 Pacific Marines, farting at thunder.
And the Herald is reporting the Government ignored treasury warnings about the Ute Tax, and the Government is denying some of the points it has made.
In the end though they will pat themselves on the back and tell themselves they tried to do the right thing, while they drive NZ into being a third world country.
Yes we are moving to third world water quality, but hey at least we look cool in our flash ute!
"New Zealand farmers have avoided regulation for decades. Now their bill has come due" It’s true farmers are facing a lot of regulation but only after decades of fighting off smaller reforms – we need them to change
https://www.theguardian.com/world/commentisfree/2021/aug/05/new-zealand…
While I disagree with the Ute Tax, Frazz, I really do strongly agree with your comment. Farmers have resisted regulation for decades, and the politicians have fallen for their BS every time. But they had to know that at some time they would need to pay the piper. Now is the time to start paying!
But instead having got away with it for so long they have essentially intensified the issues they were creating, at the top of the list - water quality. They were so smart they could not see that the longer they put off being accountable, the more it would cost to fix.
Could I suggest visiting your local farmer led water care group? 'This grim picture of the New Zealand urban freshwater environment is partially due to historical neglect and current lack of environmental stewardship. Urban freshwater bodies (be they streams, rivers or lakes) are often used as sinks for untreated urban run-off from a wide range of land uses, with the predominant urban pollutants being heavy metals (zinc and copper), nutrients (nitrogen and phosphorus), total suspended solids, polyaromatic hydrocarbons, and pathogens (e.g. E. coli). In addition to storm water run-off, a few urban waterways in Auckland also receive combined sewage overflows (CSOs), in catchments where storm water and sewage are not separated.'
https://ojs.victoria.ac.nz/pq/article/view/5683/4992
86% of NZers polluting less than 1% of NZ's waterways needs to be placed in the context of agribusiness pollution. Do you know the percentage of farmers and waterways their businesses pollute? If we did a pollution per capita how would farmers compare to urban residents?
Dairy Industry Water Accord was launched in 2003, and revised and renamed in 2013/14 https://www.dairynz.co.nz/publications/dairy-industry/sustainable-dairy…
Too selfish to give a shit - same can be said for those who live in Auckland and believe they have a right to take 50million litres a day more out of Waikato river, so they can continue to fill swimming pools and wash cars and not have ANY water restrictions. And import and burn coal so they can continue with wasteful electricity practices, rather than face electricity restrictions. ;-)
'Spain has called on the EU to back measures to limit surging electricity prices as controversy deepens over the cost to ordinary citizens of the bloc’s strategy to reduce carbon emissions.
In an interview with the Financial Times, Teresa Ribera, Spain’s deputy prime minister for the environment, suggested that high prices and charges could provoke a backlash against carbon-cutting initiatives, with Spain in the “eye of the hurricane”.
https://www.ft.com/content/7cf9a7c1-a103-4923-bb5b-bad93d32ca39
In Europe, plans to decarbonize the economy are also playing a part as utilities pay near-record prices to buy the pollution permits they need to keep producing power from fossil fuels. Add to that shortages of natural gas and the result is super-charged electricity prices, a bill consumers will eventually have to foot.'
https://www.bloomberg.com/news/articles/2021-08-05/europe-faces-an-ener…
One solution to this is a carbon dividend - use some or all of the money raised by issuing carbon credits to pay each citizen a dividend. For lower income households, this will cover the increase in costs they are seeing. Canada and Switzerland are already doing this kind of thing, hopefully more to follow.
Not 'or', 'and'. Think about the incentives that are already being created - electricity prices up, high carbon prices means coal barely viable and gas will go the same way => massive incentives to invest in renewables. This is what we're seeing in NZ - heaps of wind turbines going up at the moment and many more planned.
Not sure how the dividend thing works but frankly I believe "carbon trading" is a BS measure that will allow the worse polluters to avoid accountability for what they are doing. Only Government regulation to limit carbon production will work. But for all this to work there has to be alternatives, or an acceptance that some parts of the economy will need to roll backwards.
I'm sure there are terrible carbon trading schemes out there but NZ's is pretty decent. The government issues X number of permits to emit carbon and if you are an emitter you have to buy them directly or on a secondary market. Next year, X reduces by whatever value the government decides. It's a hard cap on emissions (although it ignores agriculture at the moment), and then let the emitters figure the rest out for themselves. The cheapest alternatives will occur as a natural function of the market.
Taking the income from the permits and doling it out per citizen would wipe out some of the arguments against the scheme from the 'big government = bad' and 'climate change is an excuse to raise taxes' crowds.
'Switzerland's policy on fighting climate change has been thrown into doubt after voters rejected key measures in a popular vote.
The measures were designed to help Switzerland meet targets under the Paris Agreement on climate change.
Opponents pointed out that Switzerland is responsible for only 0.1% of global emissions, and expressed doubts that such policies would help the environment.'
https://www.bbc.com/news/world-europe-57457384
A proposal to outlaw artificial pesticides, and another to improve drinking water by giving subsidies only to farmers who eschew chemicals were both voted down by 61%. Supporters had pointed to worrying levels of pesticides in water, and damage to plants, animals and insects. But Swiss farmers warned the proposals would put many of them out of business.
Cutting warming forecasting.
Didn't factor in clouds.
https://science.sciencemag.org/content/373/6554/474
Wait long enough and cooling will be the talk of the town again, just like the 70s.
Running a country by referendum is crazy, no meaningful decisions can ever be made. Humans only vote with their own immediate circumstances in mind. I think of when a referendum is held to determine whether there should be a rates rise of either 2% or 5% or 0%, go figure.
Yes you are quite correct.
But I would point out that until we can actually think about present people and how to look after them best we perhaps are putting the cart before the horse thinking about future people.
I am a futurist but I think we have to do some prep work before we can even think about the future.
I could also have a rant about neoliberalism, and it's effects on social contract and how people treat each other, but what's the point there is no alternative! Lol
Yes I feel society needs to have a complete paradigm shift but where does one start....short term, me, now, FOMO type thinking as opposed to lets collectively look to the future and try to make it better for other people. Yet we have this strange hedonistic/pleasure seeking/pain avoidance false paradigm our culture seems to be stuck in and if you call anyone out on it you're labelled a doom, gloom, merchant. I find it completely bizarre.
Meanwhile on planet earth - (as we all seem to be living in lalla land)
Climate scientists have detected warning signs of the collapse of the Gulf Stream, one of the planet’s main potential tipping points.
Such an event would have catastrophic consequences around the world, severely disrupting the rains that billions of people depend on for food in India, South America and West Africa; increasing storms and lowering temperatures in Europe; and pushing up the sea level in the eastern North America. It would also further endanger the Amazon rainforest and Antarctic ice sheets.
https://www.theguardian.com/environment/2021/aug/05/climate-crisis-scie…
Imagine being so deluded to think getting money from your neighbour to make your second car an EV it will change the climate back to the Little Ice Age.
For the world as a whole, its worst 5% percent of power plants contributed 73% of all electricity-based CO2 discharges.
Reducing CO2 emissions by targeting the world’s hyper-polluting powerplants
https://iopscience.iop.org/article/10.1088/1748-9326/ac13f1/pdf?mc_cid=…
"Forest clearances in Brazil's portion of the Amazon increased 1.8% in June compared to a year ago, to 1,062 square kilometers (410 square miles), according to national space research agency Inpe. In the first six months of the year, deforestation in the region has risen 17% with 3,610 square kilometers being cleared, according to Inpe."
So every year ~7000km of forest is clearing in Brazil alone. About 11-13 NZ's total end to end in land mass. Every year.
I have no doubt that this level of ecological destruction will have meaningful impacts on these global life support systems. All arguments against attempts to save ourselves by talking of economic destruction are simply not grasping the reality of the situation. Economies require stability to function and this is an existential threat to normal operations. We do not have a model or a precedent for this event but clear minds need to prevail.
Yes that may be correct but what total area of NZ do we have covered in the likes of true "Rainforest". I would suggest if you look at what a football sized bit of rainforest is doing compared to a football sized bit of grass is doing to reduce CO2 emissions your probably back to a few years not 38 years. Last I heard was a football sized bit of Rainforest disappears every minute in Brazil.
And therein lies the dilemma doesn't it? A number of countries across the world absolutely refuse to act to protect the environment in any meaningful way. But the impacts of their failures, because of their size has a dramatic impact on the whole of the planet. I not the comments about the Ute Tax above, and ask what has the most impact on the world? Economics are important, but are they so important that you are prepared to die from a environmental catastrophe clutching your wallet to your chest?
The Swiss in their referendum and what is happening in NZ in the great tally up, will have not one jot of impact on what happens in this world, but the big players seriously need to step up big time! if they don't the world they will gift to their children or grand children will mean they will likely die from some environmental catastrophe while clinging to their wallets!
S&P 500 closed at a new ATH at 4,429.10, session marked the 43rd record for the S&P 500 in 2021, also driven by global liquidity. Link
Earnings Have To Grow At 3.8% In Perpetuity For Stock Prices To Make Sense
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